Dishman Pharma - Margins staggers due to Dishman Netherlands - Karvy

Dishman's revenues increased by 19.7% YoY to Rs. 3183 mn in Q3FY13, as against our estimates of Rs. 3000mn. Dishman Netherlands margins were down to single digits due to renovation at its facility. Operating Margins were lower at 18.0% (removal of translation gains) compared to 18.5% in Q3FY12. Net Profit has shown marginal degrowth. We downgrade our rating to HOLD.

Quarter Details: The Company's CRAMs business grew 23.8%YoY to Rs2090mn (our expectations Rs.1900mn), while its Marketable Molecules rose 12.4%YoY to Rs. 1085mn (our expectations Rs.1100mn). EBITDA is at 18% in Q3FY13; lower than our estimate of 21.6% due to increase in materials, surge in staff cost and higher other expenses. Net profit is at Rs.164mn for the quarter as against our estimate of Rs 232.5mn (down by -1.8%YoY). Tax is at 27% compared to 35.7% last year for the Quarter.

Outlook & Valuation:

We maintain our revenues estimates for FY 13E, but downgrade our revenues on back of lower scale in Abbott revenues next year, removal of Brillinta opportunity for FY14E. We lower our EBDITA margins for FY 2014 mainly due to lower gross margins. We upgrade EPS estimates for FY 13E to Rs 10.5 due to higher other income, but downgrade our earnings estimates for FY 2014E by 15.1 % to Rs 12 on account of lower margins and lower revenue traction. We downgrade our price target to Rs 104 based on 8.7x FY 14E and our rating to HOLD.

Source : Equity Bulls

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